What Happens If My Business Fails and I Can't Pay My Mortgage in Indiana?
Business failure is one of the most financially devastating events a homeowner can experience. When business income disappears and business debts accumulate, your personal home can be at risk — especially if you personally guaranteed business loans or used your home as collateral. This page explains exactly how business failure can threaten your home in Indiana and what you can do about it.
Call (317) 495-3440 — Free ConsultationWhen Business Debt Threatens Your Home
Your home can be threatened by business failure in two ways: (1) Loss of income — if your business was your primary income source, you may no longer be able to make your mortgage payment; (2) Personal guarantees and collateral — if you personally guaranteed business loans or used your home as collateral (a home equity loan or second mortgage used for business purposes), creditors can pursue your home directly. Understanding which of these applies to your situation determines your options.
Personal Guarantees and Home Equity Loans
Many small business owners personally guarantee business loans, meaning they are personally liable if the business cannot repay. If you personally guaranteed a business loan and the business defaults, the lender can sue you personally and obtain a judgment lien against your home. If you took out a home equity loan or HELOC to fund your business, that debt is secured by your home — failure to pay can result in foreclosure on your home, not just the business.
Indiana's Homestead Exemption and Business Creditors
Indiana's homestead exemption under IC 34-55-10-2 protects up to $22,750 of home equity from unsecured judgment creditors, including business creditors who obtained a judgment against you personally. However, this exemption does not protect against secured creditors — your mortgage lender, home equity lender, or any creditor who has a lien on your home. The exemption only protects equity above the secured debt from unsecured judgment creditors.
Bankruptcy Options for Business Owners
Bankruptcy can provide significant relief for business owners facing home loss. Chapter 7 bankruptcy can discharge most unsecured business debts (including personally guaranteed loans that are unsecured), providing relief from the financial pressure causing you to miss mortgage payments. Chapter 13 bankruptcy allows you to restructure all debts — including mortgage arrears and business debts — into a manageable repayment plan. Chapter 11 is available for business reorganization. Consult a licensed bankruptcy attorney to evaluate your specific situation.
Selling Your Home to Resolve Business Debt
If you cannot sustain your mortgage after business failure, selling your home may be the most financially sound decision. A cash sale to a buyer like Bartolini Cash Buyers can close quickly, providing immediate liquidity to address business debts, living expenses, and a fresh financial start. Vince B. personally evaluates every property and makes a fair cash offer. We understand that business failure is a difficult situation and work with homeowners to close on their timeline.
Indiana Legal References
The following Indiana statutes are referenced on this page. Links go directly to the Indiana General Assembly website.
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